Perhaps half-senile half-wits and professional liars like Biden, Warren, and Psaki should just get out of public life. They're nuisances, at best. The Cult of Warren as a deep expert on economics and finance is particular irksome. Every time she opens her mouth on the subject, it's clear how little she knows.
Perhaps half-senile half-wits and professional liars like Biden, Warren, and Psaki should just get out of public life. They're nuisances, at best. The Cult of Warren as a deep expert on economics and finance is particular irksome. Every time she opens her mouth on the subject, it's clear how little she knows.
Of course it's money/credit demand that's the cause of *general* inflation (a general rise in the price level). It always is. The measure of broad money (M2 = M1 + short-term credit; M1 = checking accounts + cash (M0), essentially) has grown by about 40% in the last two years, the largest increase since the 1970s. Duh.
What's different about this from the 2008-17 QE experience is that QE by itself is *not* money printing, contrary to mistaken beliefs in some quarters. It's an expansion of bank reserves. (Fed creates new reserves for member banks in the system, uses those to purchase government and government-backed debt from same banks.) The actual flow of these reserves in the economy is controlled by, not the Fed funds or overnights interbank lending rate, but something relatively new, IOER (interest on excess reserves). That rate, low as it is, incentivizes banks from lending out most of the excess reserves. Its velocity is close to zero, and they don't circulate much. So in 2008-17, they contributed in only a limited way to inflation in the ordinary CPI sense. (They did contribute, massively, to asset inflation -- real estate, stocks, bonds, etc. -- by making credit ultra-easy if you already some assets as collateral -- wealth effect and all that, a major source of wealth inequality.)
What's changed is that in 2020, the Fed slipped back into a policy error from the 1960s and 70s, called "policy support" or "policy coordination," whereby monetary policy becomes subordinated to massive increases in fiscal spending, which *do* go out into the economy as ordinary circulating money or short-term credit. The last time the Fed made this mistake was in 1965, when it was forced by LBJ into it, leading to the 1965-82 Great Inflation. This time the Fed volunteered, and they at least now acknowledge their mistake. It is eerily like the 1970s, at least in some ways. First, food inflation, then energy inflation (neither is done), reflecting supply bottlenecks in overstretched industries (then caused by the Vietnam war, now caused by COVID lockdowns and labor shortages) -- then an explosion of general inflation.
Kudos to Gregg for writing and publishing this. It shouldn't be brave or controversial to tell such obvious, simple facts. In some quarters, it seems to be.
Perhaps half-senile half-wits and professional liars like Biden, Warren, and Psaki should just get out of public life. They're nuisances, at best. The Cult of Warren as a deep expert on economics and finance is particular irksome. Every time she opens her mouth on the subject, it's clear how little she knows.
Of course it's money/credit demand that's the cause of *general* inflation (a general rise in the price level). It always is. The measure of broad money (M2 = M1 + short-term credit; M1 = checking accounts + cash (M0), essentially) has grown by about 40% in the last two years, the largest increase since the 1970s. Duh.
What's different about this from the 2008-17 QE experience is that QE by itself is *not* money printing, contrary to mistaken beliefs in some quarters. It's an expansion of bank reserves. (Fed creates new reserves for member banks in the system, uses those to purchase government and government-backed debt from same banks.) The actual flow of these reserves in the economy is controlled by, not the Fed funds or overnights interbank lending rate, but something relatively new, IOER (interest on excess reserves). That rate, low as it is, incentivizes banks from lending out most of the excess reserves. Its velocity is close to zero, and they don't circulate much. So in 2008-17, they contributed in only a limited way to inflation in the ordinary CPI sense. (They did contribute, massively, to asset inflation -- real estate, stocks, bonds, etc. -- by making credit ultra-easy if you already some assets as collateral -- wealth effect and all that, a major source of wealth inequality.)
What's changed is that in 2020, the Fed slipped back into a policy error from the 1960s and 70s, called "policy support" or "policy coordination," whereby monetary policy becomes subordinated to massive increases in fiscal spending, which *do* go out into the economy as ordinary circulating money or short-term credit. The last time the Fed made this mistake was in 1965, when it was forced by LBJ into it, leading to the 1965-82 Great Inflation. This time the Fed volunteered, and they at least now acknowledge their mistake. It is eerily like the 1970s, at least in some ways. First, food inflation, then energy inflation (neither is done), reflecting supply bottlenecks in overstretched industries (then caused by the Vietnam war, now caused by COVID lockdowns and labor shortages) -- then an explosion of general inflation.
Kudos to Gregg for writing and publishing this. It shouldn't be brave or controversial to tell such obvious, simple facts. In some quarters, it seems to be.